Some relative "calm" in the lira as it is now "only" down 5% against the dollar today
At the peak of the selloff earlier, the lira weakened to 13.5% against the greenback as USD/TRY touched 6.30. Now the pair is settling around 5.85 to 5.90.
All eyes are now on Erdogan later as he will be speaking at 1100 GMT. Words alone won't mean much and without central bank action or capital controls, there is good reason to believe that the rout in the lira will deepen as long as the threat of US sanctions remain in place.
The doom and gloom over contagion effects and what not are only exacerbating the losses as Turkish assets are also selling off. Not to mention that Turkey's sovereign rating is scheduled to be updated next week by S&P as well - so any negative changes there will only add to more woes for Turkish assets.
In the midst of the sell off earlier, the bid-ask spread in USD/TRY widened to 0.01 from the usual 0.001 in normal trading:
If that doesn't say people were pushing the panic button, then I don't know what is.
But the fact that the panic has come and gone means that there is some optimism for a rebound in the lira IF there is central bank or government intervention. Again, that's a big IF.
